Unilever Plc announced on Thursday that it expects price hikes to continue for its detergents, soaps, and packaged foods to help mitigate rising input costs, but will decrease prices in the second half of 2023.
The London-based manufacturing company of Dove soaps, savory food spread Marmite, and Ben & Jerry’s ice cream predicts cost inflation to continue in 2023, estimating net resource inflation of around 1.5 billion euros ($1.6 billion) in the first half.
Over the past year, the prices of key ingredients such as cocoa, sunflower oil, and wheat have skyrocketed.
This is pushing the processed food industry to raise prices across the board.
Russia’s invasion of Ukraine pushed up the price of energy and other goods and services.
This made the industry’s difficulties worse.
Coupled with COVID-era supply chain operations and cost of raw materials.
According to Finance Director Graeme Pitkethly, “we are as of now just sitting at around 75percent of total of the overall cost inflation covered.”
If we want to fix our gross margin, that number needs to rise above 100%.
The second half of the year would bring more price hikes.
However, the hikes will slow down because “we are way past peak inflation but not past peak pricing,” as Pitkethly put it.
As underlying volumes decreased by 3.6% during the fourth quarter, underlying price growth set a new quarterly record at 13.3%.
Underlying price growth for the fourth quarter was a record 13.3% while underlying volumes fell 3.6%.
Company in Europe have indicated they may roll back price increases made over the years as the impact of falling energy and raw material prices trickles down to consumers.
This past year has been eventful for Unilever.
With three failed acquisition attempts of GSK’s (GSK.L) consumer health business, the addition of activist investor Nelson Peltz to the company’s board of directors, and the departure of CEO Alan Jope.
Hein Schumacher, a seasoned executive in the dairy industry, was announced as the company’s new CEO at the month’s close.
Waverton Investment Management’s Tineke Frikkee said the firm’s hope is that the new CEO will take over as input costs decrease. This will allow the firm to reclaim lost ground in the market.
Unilever’s fourth-quarter underlying sales grew 9.2%, which was higher than the company’s own estimate of an increase of 8.2%.
After falling by 230 percentage points to 16.1%, its underlying operating margin is forecast to remain stable at around 16% throughout the first half of the year.
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